Socialist Party documents

New Technology and Globalisation

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Length of the present cycle

The document states: 'In October 1997, Merseyside questioned, at the NC, the perspectives of the leadership in relation to the world economy. Was the world economy on the brink of a slump and was it not possible for the US cycle of growth to last for ten years?' It was not the 'Merseyside ex-comrades' but Dave Cotterill alone who defended this thesis.

Moreover, the above quote from his document shows that his criticisms of our position were of a much more fundamental character than one of the length of the present cycle.

Like Paul Storey before him, there is a hint at the possibility of a new growth period for capitalism, not the ephemeral weak booms of the last 20 years, but a structural upswing.

This is to be brought about by 'computer facture', new technology, globalisation and deregulation. Neo-liberal policies will be carried through because of the alleged political prostration of the working class on an international level.

In order to bolster their argument they caricature our position as 'primitive slumpism' and misquote from our economic analysis of the 1990s in particular.

In the section of the document dealing with 'world economic perspectives', a quote is given (which they wrongly say is from the Executive Committee of the Socialist Party in Britain and is, in reality, a document passed by the 1993 CWI World Congress) on economic perspectives.

This document states: 'An open trade war, a hot war, could precisely plunge world capitalism from a growth slowdown/recession into a slump.'

We will quote two paragraphs from this resolution to demonstrate the real approach we had in 1993:

World growth seems elusive with the most serious strategists of capital accepting that there will be no return to even the rates of growth of the 1980s.

Pessimism and deep foreboding grips the more serious strategists of capital: "trade war has replaced nuclear war as the easy way to international suicide".

And yet, not withstanding these warnings, the GATT negotiations remain stalemated. It is not excluded that some kind of paper deal and agreement can be patched up in the GATT negotiations.

However, the OECD's chief economist has recently not ruled out that the current period could turn into a 1930s style slump.

An open trade war, a "hot war" could precisely plunge world capitalism from a growth slowdown/recession into a slump.

There are a number of points to make here: one is that we recognise there was a fragile upswing taking place in 1993, but on a lower level than the 1980s and that, moreover, the possibilities of future recession was considered not just by the 'primitive slumpists' of the CWI but also by the chief economist of the OECD!

One of the characteristics of the OECD, the World Bank, etc. in the past ten years, has been, if anything, to exaggerate the growth prospects of capitalism rather than overestimate the possibility of a slump.

Flowing from this, the Merseyside document sneeringly quotes another statement of ours: 'The 1990s will be characterised by a reawakening of the European proletariat and present big opportunities for growth.' Perhaps our sages have not noticed it, but sizeable movements of the European working class have taken place in the 1990s: in Belgium, a massive public workers' strike in 1993; in Britain, the movement around the miners in 1992; in France, in the massive public sector partial general strike of 1995, and the election of the Jospin government, etc; the huge industrial movements in Germany and Italy. These do represent a 'reawakening of the European proletariat'.

It is true that this developed on the industrial plane, but is it seriously denied by our critics that, despite the confused consciousness, there was a strong political trend within all these movements in which socialist and revolutionary ideas were expressed? Thus we witnessed the singing of the Internationale on the mass demonstrations in France in 1995, a clamour for a general strike in support of the miners in Britain in 1992, etc.

Our critics quote the documents of the Socialist Party (then Militant Labour), particularly in 1995, to allegedly show that we were continually predicting an immediate recession or slump. Yet we say in the very document (British Perspectives 1995) criticised by them the following:

The USA is presently in the fifth year of a boom. Japan hardly seems to have come out of the recession of 1990/91/92.

Crippled by a massive debt burden inherited from the profligacy of the 1980s Japanese capitalism is experiencing "growth recession".

The lowest growth rate since its reconstruction after the second world war, as well as plummeting prices of assets, growing unemployment and social polarisation.

The massive indebtedness of the banks (the bad bank loans total £311bn) has prompted speculation that Japan is spiralling out of control into a new "recession"...

The processes will have run its course probably by the end of 1995 when it is expected a certain pick up in the world economy will take place.

World capitalism is not yet on the eve of a recession, it is more "reclining than declining". However, a new recession probably looms at the end of 1996 or 1997, coinciding with an expected general election in Britain, which would seal the fate of the Tory government.

Any new growth, however, will not solve the underlying problems of world or British capitalism. The "depressionary" features commented on and analysed in internal documents, the journal and the paper, are a marked feature of capitalism in this epoch.

The productive forces remain stalled. This does not preclude a certain growth, weak and uneven though it is, in world capitalism and also in Britain.

However, the rates of growth are low and very faltering, in comparison to the boom period of 1950 to 1975.

So we can see, rather than predicting an immediate slump on a certain date, we pointed towards the growth that was taking place at that stage and considered the possibility of a new recession.

We spoke about its 'probability' at the end of 1996 or 1997. You will find dozens of such elastic phrases, particularly when it comes to the timing of economic processes under capitalism, in the writings of Lenin and Trotsky in particular.

Does this invalidate the approach or the method? Unlike the Merseyside ex-comrades we take seriously Trotsky's approach towards perspectives.

It is not a question of putting forward a schema, or arithmetically accurate dates of when a slump, recession or a boom, for that matter, will take place.

For the revolutionary party, perspectives are a question of preparing for future shocks and decisive turns in the situation.

Paradoxically, this is even more important during a boom period of capitalism. And we have to ask the Merseyside ex-comrades, did you foresee any better? You will not find a line of criticism of this material from Dave Cotterill or the 'Merseyside ex-comrades', at the time that it was written.

From the foregoing, the Merseyside ex-comrades then make a leap to assert that by 1997, 'Recession was supposedly just round the corner.' They have forgotten one little detail.

Not recession, but the beginnings of a world slump began to unfold in July 1997 with the collapse of the Thai currency, the baht.

This triggered off a series of competitive devaluations, which has spiralled out of control and left Asia not in a 'recession' but in a 'slump'.

Forty per cent of world capitalism (with Latin America now joining in, it could be half the world) is either in 'recession' or in a 'slump'. Even the Japanese prime minister has admitted that Japan is in a 'prolonged slump'.

The crises in Asia, Russia, and now Latin America, have paradoxically but temporarily helped to continue the boom in the US and to a more limited extent in Europe.

The 'flight to quality' which this represents, and which the CWI and the Socialist Party have analysed many times, can only put off a recession for a temporary period.

The US economy is the prop of world capitalism at this stage but is a very shaky one (see the analysis on the US economy in the April 1999 edition of Socialism Today and The Socialist, 4 June 1999).

And what of the alternative economic prognosis of Dave Cotterill? As he explained at a British National Committee meeting, he expects the present cycle to continue.

The present boom in the US, and to some extent in Europe, 'could go on to the year 2002 or 2003'. When pressed he will add: 'It would be foolish, given the volatility of capital, to completely rule out a crash.' But this has the same function as the small print in a faulty insurance policy, which effectively cancels out the agreement.

Political economy

He clearly believes that the most likely development in the next period is that capitalism can find a way of avoiding a world recession or slump.

The document states: 'It was also raised by Merseyside about the possibility of political interventions, of the institutions of capital being mobilised to underwrite countries in crisis.'

This refers to our alleged failure to take account of 'political economy'. This is another example of Merseyside's theoretical bewilderment about how genuine Marxism approaches economic phenomena.

Marx, Engels, Lenin and Trotsky all emphasised that economic processes could not be approached in isolation from politics, the state, the class struggle, etc.

Their method of analysis was summed up in the phrase 'political economy'. The state, for instance, has an effect, and sometimes a decisive effect, on economic processes.

Politics also, as well as the class struggle, can act likewise. But this does not mean that the bourgeoisie through 'politics' or their state can arbitrarily and at will change economic developments.

Despite the references to our alleged 'crude economic determinism' (a charge levelled at us by every little sect in the last 30 years) economics is decisive in the long run.

Forty years before Merseyside, the same accusation was levelled at Trotsky by Max Shachtman, leader of the petty-bourgeois opposition in the American SWP.

Trotsky replied: 'Although economics determines politics not directly or immediately, but only in the last analysis, nevertheless economics does determine politics [Trotsky's emphasis]. The Marxists affirm precisely this in contrast to the bourgeois professors and their disciples.' [In Defense of Marxism, p119]

In certain circumstances, the capitalists can affect economic developments. In 1987 they delayed the onset of recession for two years by measures described earlier.

They have much less room for manoeuvre at present, as the example of Japan since the early 1990s has shown.

Japan has been gripped by an economic crisis and one 'reflationary' programme after another, by different governments, has had little effect.

It is true that the IMF and the World Bank have intervened in Asia and in Brazil, but only in order to reinforce the crisis by measures of austerity, which the Merseyside ex-comrades admit is their programme.

By the way, this was not always the policy of the IMF which was created originally to bolster the world economy in the aftermath of the second world war by means of Keynesian measures.

Merseyside has swallowed hook, line and sinker all the academic verbiage of the so-called financial 'experts'.

This is a cover for their helplessness in the teeth of the present crisis. There is no possibility of Keynesian measures being applied on a broad scale, as the fate of Oskar Lafontaine in Germany demonstrates, in the present phase of the economic cycle.

In their references to the crisis of 1987, Merseyside shows that they have not understood the change in the situation.

Then, Germany and Japan, with their massive surpluses, were able to intervene to cushion the dollar and the US economy.

This layer of fat could be used to temporarily delay the crisis. But this was a one-off and cannot be repeated in the current world situation.

Once the prop is knocked from under the American economy there will be a huge recoil against the neo-liberal policies of privatisation, the colossal polarisation of wealth and the squeezing of wages, particularly in the US and Britain but also throughout the capitalist world.

The present crisis which ineluctably will spread to the US and Europe, and with devastating effects, will have to run its course.

The idea that Asia and Japan will soon come out of their 'slump' is a chimera. It is more likely they will face a 'double dip'.

The collapse in the US and Europe will further drag down these regions, together with Latin America, Russia and other parts of the globe, into a world recession or slump.

In the statements, hints and innuendoes of Merseyside is an indication that they have now embraced the idea of a 'managed capitalism', as well as imbibing through academia the recently 'fashionable' theories about the 'post-structuralist', 'post-modernist' and 'post-Fordist' model of the working class today.

The multinationals

Not adherents to 'facts, stubborn facts', as Dickens would say, they make the incredible statement: 'There is not such a thing as the 'market' economy, it is a charade perpetrated upon the working class and the middle class.' To bolster this argument they then declare: 'The reality is that world trade is dominated by multinationals and transnationals, their inter-firm trade is greater than the whole of world trade.'

The only conclusion one could draw from these lines is that we confront a 'planned capitalism'. This is an echo of bourgeois and reformist arguments of the past.

Capitalist apologists refute the idea that decisive economic power is exercised by the monopolies, which they 'halfway deny', as Trotsky pointed out.

In the past, when confronted with the reality of monopoly power, they then would argue that it is organised according to a 'plan'.

The reformists repeated these arguments by trying to show that, in the 'pre-privatisation' period of capitalism, the 'state' exercised decisive economic control.

The perception of a 'managed world capitalism' merely extends this argument onto the international plane.

However, capitalism has been unable to develop a single one of its trends to the ultimate end. As Trotsky prophesised, 'monopoly does not abolish competition but only bears down on it and mangles it.' [Marxism In Our Time]

It is an exaggeration to say - as Dave Cotterill does - that the inter-firm trade amongst the multinationals 'transnationals' exist in just one company - Shell -although bourgeois economists use 'transnationals' to describe what are in reality multinationals) is greater than the whole of world trade.

John Gray, in False Dawn: The Delusions of Global Capitalism, points out: 'Multinationals now account for about a third of world output and two-thirds of world trade. Most significantly, around a quarter of world trade occurs within multinational corporations.' [p62]

The tendency in the past towards the elimination of competition and the development of monopolies on a national level did not completely eliminate competition.

If anything, it became enormously intensified on an international level and through world trade. This is even more the case today with the adoption of neo-liberal policies, the dismantling of national barriers in the face of the 'free movement of capital'.

All the major industries are dominated by a handful of monopolies. But this has not led to the elimination of competition or towards greater 'cooperation'.

On the contrary, the most brutal and vicious confrontation of one monopoly against another takes place.

Each monopoly tries to outstrip and destroy its rivals. This is clearly seen in the car industry where, despite the huge surpluses which now exist, the major car manufacturers of General Motors, Ford, Toyota, Daimler, etc, are in a never-ending battle to outstrip and beat their opponents.

They seek an edge by investing in the latest technique with a higher productivity of labour, etc.

Moreover, as John Gray points out, these multinationals are not 'homeless transnational institutions which move across borders without cost and express no particular national business culture. They are often companies which retain strong roots in their original economies and cultures. In a systematic and comprehensive survey, Ruigrok and van Tulder concluded that few, if any, of the world's biggest companies are fully global... Nearly all multinationals express and embody a single parent national culture. This is true especially of American firms.' [False Dawn, p63]

He further points out: 'It is fashionable to see multinational corporations as constituting the kind of invisible government supplanting many of the functions of the nation state. In reality, they are often weak and amorphous organisations. They display the loss of authority and the erosion of common values that afflicts practically all late-modern social institutions. The global market is not spawning corporations which assume the past functions of sovereign states. Rather, it has weakened and hollowed out both institutions.' [p63]

Merseyside does not even have the grasp of reality of modern monopoly capitalism shown by bourgeois writers like John Gray.

Their arguments are contradictory on the issue of protectionism. On the one side, they concede that there is a form of 'concealed protectionism' but, because of the existence of multinationals and 'transnationals', they then declare: 'Why then would they want to turn to protectionism?' The clear implication is that monopolies can sort it out amongst themselves, without the interventions of government, and they clearly would not want protectionism because this would harm them.

This completely misses out the intense rivalry between the individual capitalists or groups of capitalists.

Moreover, it is not a question of logic' or what is rational when it comes to the workings of the capitalist system.

If this was so, the capitalists, by rational 'agreement' and discussion, would avoid all conflict, including the highest form of conflict, that is, war.

But the very nature of capitalism, the separate and conflicting interests of the capitalists, involves a struggle, a jostling between different economic forces.

In a period of upswing, or even of slow, feeble growth, then they can arrive at agreement among themselves.

But in a period of stagnation, of recession or slump, then they will struggle for the best position for themselves in dwindling and contracting markets.

What do the Merseyside ex-comrades think is taking place in South-East Asia? There a trade war is fought out not by means of open protectionist measures (although Mahathir Mohamad in Malaysia has partially gone down this road) but by means of competitive devaluations which attempts to unload the burden of the crisis onto the shoulders of other competing capitalists.

The struggle between Europe and America on the issue of bananas and genetically modified food is a symptom of the present situation and a portent of what could come on the basis of a serious economic crisis.

Ruling-class strategies

It is naive and childish - given the economic catastrophes that loom - to believe that capitalism, by reason and persuasion, can reconcile brutal antagonistic interests.

We have to confess that we had to rub our eyes when we read the following statement 'If more attention was paid to the political processes of the forum which meets annually in Davos and subsequently directs much of national government policy then the SP would not be in the mess it is in today.'

It is not the SP but the handful of 'Merseyside ex-comrades' who have followed Dave Cotterill who are completely disorientated by his analysis.

The picture of Davos which we recently witnessed was not the calm, sober, confident capitalist leaders who believe they have a way out of the economic morass, as Merseyside argues.

On the contrary, utter perplexity, fear and vicious back-biting between different capitalist interests was the order of the day.

Mahathir, reflecting the bitterness of the populations of the underdeveloped world at the wreckage of their economies said: 'Governments who fail to act against currency speculators, should either resign or be thrown out.' He went on to 'compare them to arms traders, saying their actions were no less lethal than rockets and bombs'.

Lest it be thought that it was merely the representatives of the underdeveloped capitalist world who expressed fear, then let us quote the representative par excellence of US capitalism, former US Treasury Secretary Robert Rubin.

He bluntly declared: 'The world is in the most serious financial crisis it has faced for 50 years.' He went on: 'Opposition to the market-based system is bound to grow due to the current economic crisis.' A few months later he jumped ship and resigned!

Like Merseyside, unfortunately, who have borrowed all the latest empty phraseology of the bourgeoisie themselves, he spoke about the need to change the 'architecture' of world capitalism but, in essence, dished out the same neo-liberal policies as in the past.

Henry Kissinger, former US Secretary of State, struck a more sombre note when he pointed to the 'political obstacles to globalisation which will grow if the international system is not fundamentally reformed'.

Attacking the International Monetary Fund, he declared: 'It has not worked in any country, and in Indonesia it has produced a political catastrophe.' Complaining about the calibre of the political leadership of the bourgeoisie, he declared: 'The US political system generates tacticians of how to get on the domestic evening news rather than considering where we are trying to go.' And it was left to Klaus Schwab, the very founder and president of the Davos World Economic Forum, to point to the enormous growing instability and unpopularity of capitalism and its policies.

He declared: 'We are in some way in the end phase of globalisation, but we don't have yet the necessary structure and instruments to really deal with globality.'

When asked as to why he had changed terminology from 'globalisation' to 'globality', he declared: 'My answer is that globalisation has become an ideologically loaded word. Globalisation is seen as a heartless economic process that destroys jobs and cultures. It has become a scapegoat for everything which is bad. So I prefer the word globality because it integrates the soul and heart into the process.' Change the name and you change the essence!

But this will not make the effects of globalisation, neo-liberalism and deregulation any more palatable to the masses who carry the consequences of them in their daily lives.

But Schwab and the other participants at Davos, have more of a feel for what is coming than, unfortunately, the Merseyside ex-comrades.

When asked as to the differences between business leaders and capitalist economists, Schwab said: 'What we have now is a situation of extreme vulnerability, but also great opportunity for those prepared to take risks and move ahead. If you listen during the meeting to the economists, you heard an emphasis on the vulnerabilities, on the possibilities of a meltdown -the vulnerabilities of the United States... But the business leaders here are, on the whole, the more successful ones in their industries. Over the last three or four years the companies have been restructured and are leaner and they are optimistic. Jurgen Schrempp and Robert Eaton, of Daimler/Chrysler, for example, see enormous overcapacity in the global automobile industry, yet envisage a great future for their company.'

In other words, the average big-business leader is generally politically myopic, seeing the small picture of his own particular company, while the situation, even in his industry as a whole never mind the wider economic situation, is secondary.

The bourgeois 'economists', like the political strategists of the ruling class such as Kissinger, are necessary for the bourgeoisie to see the 'big picture', the general overall situation.

They are the thinkers who see the dangers to their system and seek to avoid them. At Davos they were in the camp of the 'pessimists' as far as the immediate future of capitalism was concerned, and many did not at all concur with the sunny optimism of Merseyside.

Neither the interventions of the IMF, nor cuts in interest rates, which are in any case already taking place, or measures to 'nationalise the debt' can avoid the economic and financial nemesis which looms for world capitalism once the economic bubble bursts.

The US economy is at the same stage that Japan was in at the end of the 1980s, with a financial and asset bubble which is about to be pricked.

Once the US is affected, possibly triggered by any number of events, this will bring world capitalism down like a house of cards.

How deep and how prolonged the crisis is likely to be is not possible to foresee exactly in advance. However, the next recession/slump is more likely to be akin to 1974-75, i.e. a drop in world production, but possibly deeper and longer than then.

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